Samsung in Hot Water for Leaking Apple Secrets

Samsung won't get off easy if it exposed Apple's trade secrets. "It takes incredible hubris to take the documents, leverage them with Nokia, and not figure this thing isn't going to come back on them. It's quite shocking," said patent attorney Michael Lasky. "You rarely get a set of facts that are so nice. If all of this is true, it's hard to believe it isn't something written by Hollywood."

A federal district court judge on Wednesday ordered Samsung to produce more evidence in a case that could result in it being penalized for exposing Apple's trade secrets.

Samsung was ordered to produce by Oct. 16 communications and witnesses related to the dissemination of confidential Apple licensing agreements to Samsung employees.

Samsung had obtained from its attorneys a report that contained confidential information on Apple's patent licensing agreements with Nokia, Ericsson, Sharp and Philips, according to an order issued by Judge Paul S. Grewal.

"Because it addressed highly confidential, attorneys' eyes only information, the report should have been fully redacted of that information before it was sent," Grewal wrote.

"However, intentionally or inadvertently, it was not," he continued. "The report as distributed included key terms of each of the four Apple license agreements."

Subsequently, the report was posted to an FTP server accessed by Samsung employees and sent directly to a number of high-ranking licensing executives, among others.

"It is possible that Dr. Ahn's encounter with Mr. Melin occurred very differently," Grewal wrote. "Unfortunately, the court cannot say, because Samsung has elected not to provide the court with any sworn testimony from Dr. Ahn or anyone else at the meeting."

The judge made this further observation:

Whether the actions of Samsung and its counsel are worthy of sanctions, and what those sanctions might be, the court cannot yet say. However, it can say that letting Samsung and its counsel investigate this situation without any court supervision is unlikely to produce satisfactory results. Rarely is the fox is permitted to investigate without supervision the disappearance of chickens at the henhouse.

It is equally intolerable to allow this situation to fester for weeks, let alone months, with a second trial rapidly approaching. That would be just as unfair to those who may ultimately be shown to be innocent of any wrongdoing as to those who may have been significantly harmed by improper conduct.

Samsung Breaking Bad

If sanctions are imposed in the case, they could be substantial.

"If Apple can prove its case, they, and even Nokia, may be entitled to damages," Michael Lasky, a patent attorney with
Schwegman Lundberg Woessner, told MacNewsWorld.

"There may also be the possibility that sanctions will be applied to Samsung in significant amounts of money," he said.

"This won't be a slap of the hand because you violated a rule," Lasky maintained. "You've caused serious damage over an existing court order so the judge has pretty much unlimited discretion here."

Samsung's audacity in the affair surprised Lasky. "It takes incredible hubris to take the documents, leverage them with Nokia, and not figure this thing isn't going to come back on them. It's quite shocking," he said.

"It doesn't look good for Samsung," Lasky emphasized. "You rarely get a set of facts that are so nice. If all of this is true, it's hard to believe it isn't something written by Hollywood."

PR Hit

Samsung could be in for some tough treatment by Judge Grewal, said Florian Mueller, intellectual property activist and author of the
Foss Patents blog.

"The alleged leaking of terms would be a serious violation of a court's protective order and could result in drastic sanctions for Samsung and its counsel," he told MacNewsWorld.

Even if Samsung escapes sanctions, there may be a public relations price to pay for its behavior.

"Samsung must take better care of its reputation than being in the news mostly for allegations of manipulating benchmarks and illegally accessing other parties' highly confidential business information," Mueller said.

It could also hurt Samsung -- never a company to shy away from a courtroom -- in future legal battles.

How all this will shake out for Apple in future patent negotiations remains to be seen, but it's already known how it worked out for Samsung.

"I doubt that Samsung does this routinely," Mueller said, "but let's not forget that what allegedly happened to the Apple-Nokia patent agreement also affects deals Apple struck with other players, including Ericsson, Sharp and Philips."

Samsung North America's Director of Corporate Communications Adam Yates declined to comment for this story.

Nokia and Apple did not respond to our requests to comment for this story.